Posted at 8:00 AM (CST) by & filed under Jim's Mailbox.

Dear Friends,

We received this note on Friday from noted UK gold author Tim Green who believes that Chinese buying of gold could be a significant factor going forward in the marketplace. Tim is the author of "The Ages of Gold" which is available on the GFMS (Gold Fields Mineral Services) website at: http://www.gfms.co.uk/

David Duval

"The story today that China has quietly increased its offical gold stocks since 2003 from 600 tonnes to l,054 tonnes is regarded here as very significant for the gold market.

Although it is a relatively small amount spread over several years, and bought from local scrap and mines, analysts here say it could signal a trend over the next few years. Gold still only accounts for 1.6% of China’s reserves, but it might make purchases on the open market. Even go for the propsed IMF sales, if they materialise. In short, it is an interesting signal.

No doubt it helped the price today. And will probably encourage investors – and maybe some other central banks with too many dollars.

Incidentally, I amused one leading analyst here this morning by pointing out that in Ages of Gold, I report Chinese Emperor Wang Mang in AD23 had gold stocks of l55 tonnes; so China today has only 7 times as much as 2000 years ago.   So there is room for further buying!

Best,
Tim"

Dear XXXX,

I am an admitted gold bug , (perhaps later to be committed). I have been reading your missives for 2 years now, and frankly can’t figure out which side of the fences you are on half the time. I am sorry that you seem to hold some animosity towards my mentor, Jim Sinclair. I find much comfort in the fact he is honest, knowledgeable, transparent and straightforward, with no hidden agendas. Unfortunately I don’t gain that feeling from your chameleon like writing. From today’s writing and on another note altogether, I highly doubt it will be the world’s poor that will be damned, regardless of what I choose to do with my gold.

CIGA Dave

Dear Dave,

This world is full of judgement, making people who simply hate for the sake of hate.

Asking them why does not penetrate the hatred that has no basis, however your note was kind and to the point.

Regards,
Jim

Jim,

Greenspan is whispering to Bernanke in this picture…

"Gold still represents the ultimate form of payment in the world."

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard."

–Quote from Alan Greenspan

clip_image001

CIGA "The Gordon"

Posted at 5:19 PM (CST) by & filed under In The News.

Dear CIGAs,

The following is a collection of information in PDF format regarding the Swine Flu outbreak.

Antiviral Recommendations for Patients with Confirmed or Suspected Swine Influenza A H1N1 Virus Infection and Close Contacts
Antiviral Agents for Seasonal Influenza Side Effects and Adverse Reactions
CDC Briefing on Public Health Investigation of Human Cases of Swine Influenza
CDC Health Advisory – Swine Flu
Human Swine Influenza Investigation 26APR09
Interim Guidance for Swine influenza A H1N1 – Taking Care of a Sick Person in Your Home 25APR09
Interim Guidance on Case Definitions to be Used For Investigations of Swine Influenza A H1N1 Cases 26APR09
Media Availability on CDC Investigation of Human Cases of Swine Influenza 25APR09
Prevention and Control of Influenza recommendations of acip 2008
Swine Flu Q&As
Dosage of Seasonal Influenza Antiviral Medications for Treatment and Chemoprophylaxis for the 2008 09 Season United States

Google Maps Plot of the Swine Flu (H1N1) Outbreak (Click to enlarge)

SwineOutbreakMap

Jim Sinclair’s Commentary

This is one way to really wreck your weekend.

Obama is greeted by an archaeologist upon his visit to Mexico. The archaeologist dies next day from the flu.

Mexico’s Calderon Declares Emergency Amid Swine Flu Outbreak
By Thomas Black

April 25 (Bloomberg) — Mexican President Felipe Calderon declared an emergency in his country’s swine flu outbreak, giving him powers to order quarantines and suspend public events.

Authorities have canceled school at all levels in Mexico City and the state of Mexico until further notice, and the government has shut most public and government activities in the area. The emergency decree, published today in the state gazette, gives the president authority to take more action.

“The federal government under my charge will not hesitate a moment to take all, all the measures necessary to respond with efficiency and opportunity to this respiratory epidemic,” Calderon said today during a speech to inaugurate a hospital in the southern state of Oaxaca.

At least 20 deaths in Mexico from the disease are confirmed, Health Minister Jose Cordova said yesterday. The strain is a variant of H1N1 swine influenza that has also sickened at least eight people in California and Texas. As many as 68 deaths may be attributed to the virus in Mexico, and about 1,000 people in the Mexico City area are showing symptoms of the illness, Cordoba said.

More…

Swine Flu Prompts U.S. to Declare Public Health Emergency
By KEITH BRADSHER and JACK HEALY
Published: April 26, 2009

American health officials on Sunday declared a public health emergency over increasing cases of swine flu, saying that they had confirmed 20 cases of the disease in the United States and expected to see more as investigators track down the path of the outbreak.

“We are seeing more cases of swine flu,” Dr. Richard Besser, acting director of the Centers for Disease Control, said in a news conference in Washington. “We expect to see more cases of swine flu. As we continue to look for cases, I expect we’re going to find them.”

“This is moving fast,” Dr. Besser said, “but we want you to understand that we view this more as a marathon.”

Although officials said most of the cases have been mild and urged Americans not to panic, the emergency declaration intensifies the government’s response to the infections, freeing resources to be used toward diagnosing or preventing additional cases and releasing money for more antiviral drugs.

Homeland Security Secretary Janet Napolitano, speaking at the same news conference called the emergency declaration “standard operating procedure,” and said it should be considered a “declaration of emergency preparedness.”

More…

 

Jim Sinclair’s Commentary

Now here is a new wrinkle. Thank goodness we can depend on government organizations to keep us properly and completely informed.

WHO is well known for its prose.

WHO Fukuda: No Evidence Swine Flu Is Bioterrorism Attack

ZURICH -(Dow Jones)- The World Health Organization said Sunday there is no evidence an outbreak of swine flu in Mexico represents an act of bioterrorism.

"There are no signs we are dealing with purposeful actions," Dr. Keiji Fukuda, the WHO’s temporary assistant director-general for Health Security and the Environment, said on a media call.

Fukuda was responding to a question about U.S. President Barack Obama’s recent visit to Mexico, where at least 81 people have died from severe pneumonia caused by the flu-like illness in Mexico, according to the WHO.

More…

Jim Sinclair’s Commentary

Do you remember signing up for this? Who monitors the monitors? This is from 2005 but is still relevant today.

Scientists Resurrect Deadly Flu Virus
By William Hathaway
As published in The Hartford Courant, October 6, 2005.

Scientists have resurrected one of the world’s great killers in the laboratory, hoping that the genetic secrets within the 1918 influenza virus will help them predict and combat the next major microbial threat to mankind.

In a contained laboratory at the federal Centers for Disease Control and Prevention in Atlanta, scientists used reverse genetics to re-create the 1918 flu virus that killed 20 million to 50 million people, according to studies released Wednesday. Scientists say that although the 1918 strain probably does not represent a significant human health threat today, it can provide insight into dangerous types of contemporary influenza, such as the highly lethal avian strain now circulating among birds, which some scientists fear could evolve into the next catastrophic pandemic.

"This is truly a spectacular event," Dr. John Shanley, professor of medicine and director of infectious diseases at the University of Connecticut Health Center, said of the studies published in the journals Nature and Science. "To resurrect a virus and gain useful scientific information from it is remarkable."

An analysis of the genetic structure of the 1918 strain, also known as Spanish flu, reveals that it was an avian influenza, like the current H5N1 strain that has infected poultry and migratory birds in Asia and caused scores of human deaths.

The 1918 virus’s jump from birds to humans, perhaps through intermediary animals such as pigs, was different from the two other outbreaks of pandemic influenza that occurred in the 20th century. Those pandemic strains in 1957 and 1968 occurred when novel influenza genes mixed with existing human influenzas.

More…

Mexico flu: Your experiences

Readers in Mexico have been emailing the BBC describing the sense of fear gripping the country as a result of a flu virus outbreak, which has so far claimed more than 80 lives.

The World Health Organization says the virus has the potential to become a pandemic.

Read a selection of BBC readers’ comments below.

I’m a specialist doctor in respiratory diseases and intensive care at the Mexican National Institute of Health. There is a severe emergency over the swine flu here. More and more patients are being admitted to the intensive care unit. Despite the heroic efforts of all staff (doctors, nurses, specialists, etc) patients continue to inevitably die. The truth is that anti-viral treatments and vaccines are not expected to have any effect, even at high doses. It is a great fear among the staff. The infection risk is very high among the doctors and health staff.

There is a sense of chaos in the other hospitals and we do not know what to do. Staff are starting to leave and many are opting to retire or apply for holidays. The truth is that mortality is even higher than what is being reported by the authorities, at least in the hospital where I work it. It is killing three to four patients daily, and it has been going on for more than three weeks. It is a shame and there is great fear here. Increasingly younger patients aged 20 to 30 years are dying before our helpless eyes and there is great sadness among health professionals here.

More…

Jim Sinclair’s Commentary

The Secretary of the US Treasury had some luck taking the equity rally up, so why not Summers? An uptick rule with teeth will come when talks fail. Two more months is too long to wait as a hard break down is the stuff that kills rallies.

Summers says U.S. economy’s freefall has ended
Sun Apr 26, 2009 12:19pm EDT
By Donna Smith and Will Dunham

WASHINGTON (Reuters) – The sense of "unremitting freefall" in the U.S. economy has ended and the picture is no longer completely negative, but rather mixed, President Barack Obama’s economic adviser Lawrence Summers said on Sunday.

Speaking on the "Fox News Sunday" program, Summers also said the "vast majority" of U.S. banks are well capitalized and expressed hope that the auto negotiations between Chrysler and Italian carmaker Fiat SpA would work out.

"Six or eight weeks ago, there were no positive statistics to be found anywhere. The economy felt like it was falling vertically. Today, the picture is much more mixed," Summers said.

"There are some negative indicators, to be sure. There are also some positive indicators. And no one knows what the next turn will be," he said. "But I think that sense of unremitting freefall that we had a month or two ago is not present today. And that’s something we can take some encouragement from."

The U.S. economy, now in its 16th month of recession, shrank at a 6.3 percent annual rate in the fourth quarter of 2008, the steepest quarterly plunge in more than 26 years. Economists expect a report on Wednesday to show it slipped a further 5 percent in the first three months of this year.

More…

Jim Sinclair’s Commentary

No problem. Central banks will simply create more capital. The magic trick has a fancy name, Quantitative Easing, which was formerly known as monetizing new debt.

The capital well is running dry and some economies will wither
The world is running out of capital. We cannot take it for granted that the global bond markets will prove deep enough to fund the $6 trillion or so needed for the Obama fiscal package, US-European bank bail-outs, and ballooning deficits almost everywhere.
By Ambrose Evans-Pritchard

Unless this capital is forthcoming, a clutch of countries will prove unable to roll over their debts at a bearable cost. Those that cannot print money to tide them through, either because they no longer have a national currency (Ireland, Club Med), or because they borrowed abroad (East Europe), run the biggest risk of default.

Traders already whisper that some governments are buying their own debt through proxies at bond auctions to keep up illusions – not to be confused with transparent buying by central banks under quantitative easing. This cannot continue for long.

Commerzbank said every European bond auction is turning into an "event risk". Britain too finds itself some way down the AAA pecking order as it tries to sell £220bn of Gilts this year to irascible investors, astonished by 5pc deficits into the middle of the next decade.

US hedge fund Hayman Advisers is betting on the biggest wave of state bankruptcies and restructurings since 1934. The worst profiles are almost all in Europe – the epicentre of leverage, and denial. As the IMF said last week, Europe’s banks have written down 17pc of their losses – American banks have swallowed half.

"We have spent a good part of six months combing through the world’s sovereign balance sheets to understand how much leverage we are dealing with. The results are shocking," said Hayman’s Kyle Bass.

More…

Jim Sinclair’s Commentary

Therefore the West will do what, and when?

Clinton Says Pakistan Cannot Let Atomic Arsenal Fall to Taliban
By Indira A.R. Lakshmanan

April 26 (Bloomberg) — Secretary of State Hillary Clinton says the U.S. is worried about the “unthinkable” in Pakistan – – that the Taliban and al-Qaeda could topple the government, giving them “the keys to the nuclear arsenal.”

Clinton, in an interview with Fox News last night in Baghdad, said the U.S. cannot “let this go on any further, which is why we’re pushing so hard for the Pakistanis to come together around a strategy to take their country back.”

After failing to vanquish Taliban forces in Pakistan’s Swat Valley, the government in Islamabad signed a peace accord in February permitting the imposition of Islamic law in the region, 100 miles (161 kilometer) from the capital. The Taliban has taken advantage of the truce to challenge government authority in adjacent districts closer to Islamabad.

Last Friday, Prime Minister Yousuf Raza Gilani insisted his country will fight back. The extremists threaten “Pakistan’s very existence,” U.S. Army General David Petraeus told a House of Representatives subcommittee in Washington the same day.

Clinton told Fox that “we can’t even contemplate” the consequences if the Taliban were permitted to overrun nuclear- armed Pakistan because of the failure of the government “to beat them back.”

More…

Posted at 5:07 PM (CST) by & filed under Jim's Mailbox.

Dear Jim,

I thought the following might be of interest to you:

Best,
Your CIGA, thenose

(Excerpts From Article)

Gold
Its Role within the Modern Investment Strategy
08/94 Princeton Economic Institute
By Martin A. Armstrong

There have been numerous people who have argued that gold is THE hedge against inflation. Many will tout their fancy statistics and point to all sorts of charts in support of their case. Others will argue that gold rises during geopolitical uncertainty and at the first outbreak of war it should be bought. And yet there are still others who claim that gold has LOST its luster and is a throw back to ancient times. In their boasts, they claim that inflation has been vanquished and that gold is no longer needed to stabilize the world monetary system.

In an effort to answer these questions in hope of separating the MYTH from REALITY, it demanded that a very long database be constructed. Looking at gold’s performance over the past 20 or 30 years is simply NOT enough historical perspective to come up with a realistic outcome untainted by subjective theories and biases.

To start, we gathered one of the more consistent time series on inflation – the US Wholesale Price Index. The prices of raw commodities at the producer level have always been a more definitive view of inflation rather than the politically manipulated CPI (Consumer Price Index). Due to the fact that the CPI is used to adjust taxes, real interest rates, social security payments and entitlement increases of all sorts, the formula for the CPI has undergone at least 14 MAJOR revisions since World War II. The last revision of major importance took place back in 1983 when real estate was largely replaced by rents. This revision was significant due to the fact that it accounted for 40% of the total CPI prior to that time. The revision was carried out under the pretense that housing was better reflected by rent than value. Appreciation in housing itself was viewed as an investment – not part of the true cost of living

Conclusion

The illustration of gold’s rise in the face of declining confidence in government is endless. The hoarding of gold was so severe during the Great Depression that Roosevelt ended up outlawing the private ownership of gold and confiscated everything the government could find. Quite a drastic police state tactic. Nevertheless, it did happen here in the United States!

In this brief overview of financial history, one striking common theme arises from the trials and tribulations of man – gold rises NOT as a hedge against mere inflation, but as a hedge against the UNSOUND PRACTICES OF GOVERNMENT and/or POLITICAL UNCERTAINTY. Steady rising inflation DOES NOT act as an underlying support mechanism for gold. Its role within the modern investment strategy is a hedge against political and economic uncertainty. Gold has always risen the MOST when the confidence in the government is at its LOWEST!

More…

Dear Jim,

Concerns about the Swine Flu outbreak turning into a Global Pandemic are escalating. The World Health Organization is already considering whether to issue nonbinding recommendations on travel and trade restrictions, and even border closures.

If this turns into a Pandemic at a time when Pakistan is on the verge of collapse, the global economy is in crisis, and hyperinflation begins to spin out of control, then the Four Horsemen of the Apocalypse will be upon us.

Swine flu fears prompt quarantine plans, pork bans
By FRANK JORDANS, Associated Press Writer Frank Jordans, Associated Press Writer

GENEVA – Canada became the third country to confirm human cases of swine flu Sunday as global health officials considered whether to raise the global pandemic alert level.

Nations from New Zealand to Spain also reported suspected cases and some warned citizens against travel to North America while others planned quarantines, tightened rules on pork imports and tested airline passengers for fevers.

Nova Scotia’s chief public health officer, Dr. Robert Strang, said the east coast Canadian province had confirmed four "very mild" cases of swine flu in students ranging in age from 12 to 17 or 18. All are recovering, he said.

More…

You and the team at JSMineset have done an extraordinary job keeping your readers informed of the long-range implications regarding all of these issues.

May God bless you all and keep you safe.

All the best,
CIGA Black Swan

Posted at 7:51 PM (CST) by & filed under David Duval.

Dear CIGAs,

Evaluating the merits and future prospects for a junior exploration company is a highly subjective process. Intangibles such as political risk, financial risk, market risk, commodity risk, technical risk and a host of other variables confront companies across the entire minerals industry spectrum. Nonetheless, no matter what the relative size of the company or the commodities segment it’s actively involved in, the best place to start your evaluation is with management.

This is especially true for junior gold explorers, the segment of the minerals industry that accounts for the largest proportion of global exploration expenditures and, predictably, the vast majority of new gold discoveries.

In reality, these are the “feeder companies” for the major gold producers whose primary focus is usually weighted to production (i.e. bread and butter issues) rather than exploration. In order to maintain the annual production rates that underpin their share price valuations, these majors need new sources of gold production and junior explorers are usually the ones that feed their insatiable appetites. Not surprisingly, when push comes to shove they are generally willing to pay a king’s ransom for undeveloped, economically viable gold resources in the ground.

Let’s have a broad look at several important criteria one should examine before determining a suitable investment in this often complex but infinitely exciting investment sector.

Management: Do the Litmus Test

It shouldn’t come as any surprise that good management can spell the difference between success and failure. So how does one determine if management is good or bad?

First and foremost past success is arguably among the best litmus tests for gauging management, although it’s certainly no guarantee. In this Internet age, regulatory filings and Google searches can often reveal a library of information on specific individuals and corporate entities.

A good CEO with a track record that includes at least one notable success generally has the ability to attract risk capital because people like to bet on a jockey that’s won a race already. In addition to having market recognition from past successes, they often tend to be magnets for high quality exploration projects.

Most investors in this market sector have observed seemingly well qualified management ruin good exploration companies because of bad technical judgements and even poorer market decisions. In the latter case, non-market oriented executives often forget that markets and exploration-related activities are closely aligned – if not joined at the hip. Those who manage one without paying attention to the other do so at their peril.

These days it’s quite uncommon for industry executives to have a personal investment in the companies whose future they control. Instead, they elect to take large salaries and award themselves cheap stock options which are typically re-priced lower when the company’s stock price reflects their lack of success.

Executives who are willing to risk their own money with ordinary shareholders have an added incentive to be successful. In old fashioned terms, it’s called “putting your money where your mouth is” – a lesson that unfortunately is largely ignored by most contemporary mining executives. Their shareholding need not necessarily be large but it should at least be meaningful.

It’s also wise to look for management with a broad knowledge of the minerals industry and capital markets, both of which are integral to running a successful company. These attributes need not be exclusive to the CEO but they should feature prominently within the corporate management team including the board of directors.

Senior executives don’t necessarily have to be geologists or engineers but they should at least have the ability to attract, manage and motivate a multi-disciplined group of industry professionals who share the corporation’s philosophy and objectives. Who can forget Paul Penna who brokered penny stocks in Toronto before he became the guiding force and chief executive behind one of the most successful mining companies in the world, Agnico-Eagle?

Personal integrity and the ability to communicate the company’s message to shareholders and the marketplace round out the critical attributes that one should look for in public company management.

Summary:

In the minerals business, past performance is often a good indicator but not a guarantee of future success. Pick management with strong track records and preferably at least one notable success (i.e. mineral discovery). The ability of management to raise capital to fund the company’s activities on an ongoing basis is also critical as the price of any exploration company’s stock is results driven – and getting those results costs money.

Management integrity can be determined by examining the way a company conducts its business, especially in foreign jurisdictions. In the case of developing economies, this would include a strong commitment to the principles of sustainable development.

Also, one should keep in mind that a company can be a success in the marketplace without taking a project to commercial production. In fact, the majority of mineral explorers never achieve such a distinction, selling out instead to an operating company with production expertise, perhaps retaining a royalty in future production.

Project Selection: The Best Place to Find a Mine is Where There is One

There are many aspects to selecting a good minerals project. But smart companies attempt to reduce some of the geological risk by exploring areas with known mineral potential as well as active mining operations.

Most of the world’s gold production comes from greenstone belts, ancient volcanic and sedimentary rocks that feature prominently in the mining industries of Canada, Australia and South Africa. These belts typically host a broad range of metals including gold, silver, platinum, nickel, copper, lead, zinc and even diamonds.

When you examine the evolution of these belts from a precious metals standpoint, new discoveries are being made well over one hundred years after the initial discoveries. Emerging greenstone belts, including the Lake Victoria Greenstone Belt in Tanzania, are relatively early in their development and will likely account for increasing amounts of gold and base metals production in the years ahead. In these regions, the larger the land position you have the better!

Companies exploring such areas are generally good exploration bets because the infrastructure in these regions tends to be better and the local population generally has a cultural affinity towards mining.

Summary:

Pick companies with large strategic landholdings and exploration projects in areas with proven geological potential, active mining operations (= good infrastructure), and a recent history of discovery and new mine development.

Project Development: Establishing the Big Picture

Exploration methodology has changed little in decades with the exception of data processing which today is understandably highly computerized. “Boots on the ground” remains the most effective method of discovering mineral deposits and that’s not likely to change any time soon – if ever.

Evaluating an exploration project is most meaningful at the drilling stage and this is when investors usually step into the marketplace. Market activity during this period is generally based on the timely release of exploration results. Understandably, diamond drilling or rotary drilling results are considered the “Gold Standard” during this phase of exploration because these results comprise most of the input data for resource calculations.

In Canada, geologists must adhere to the 43-101 standard when reporting resources for any commodity. This standard is a codified set of rules and guidelines for reporting and displaying information related to mineral properties; and it applies to any company listed on a Canadian exchange which is where the majority of the world’s junior explorers are trading.

Resource estimates are by far the most misunderstood feature of the 43-101 reporting standard. Investors like to apply values to resources that have not been proven economically viable which is a long, costly process. This is particularly true for “Inferred Resources” which have a great amount of uncertainty as to their existence, along with their economic viability. It cannot be assumed that all or any part of any Inferred Mineral Resource will ever be upgraded to a higher category.

For large exploration projects, most companies focus on developing the property-wide potential with widely-spaced drill holes. The reason for this is actually quite simple and practical. Drilling is expensive so rather than expend money tightening up drill hole spacing to produce a resource with no economic legitimacy, companies prefer to assess the global potential to ensure they end up testing the most attractive targets.

Summary

When assessing the potential of a mineral property, make sure your analysis falls within a big picture context. One thing to look for is a broad distribution of gold values on the property. You can find comprehensive information on exploration companies from publicly disseminated news releases and regulatory filings. The technical information in these filings has to be 43-101 compliant, providing a high measure of security to investors. Be careful not to apply economic viability to any resource category, especially inferred resources. Even resources that are included in a full fledged feasibility study are subject to various assumptions including future commodity prices.

Exploration Agreements: The Devil is in the Details

Minerals exploration is often conducted under joint venture agreements. In these situations a corporate entity has the right to earn a specific interest in an exploration project for a set expenditure over a specific period of time. In most cases, the expenditure commitment would include money for exploration and staged option payments to the property owner. Look closely at the JV agreement to determine what interest the optionee can earn (the larger the better) and the cost associated with earning that interest.

Junior partners involved in exploration joint ventures with major companies are at a distinct disadvantage. Make sure they have the internal ability or have sought professional help to ensure their joint venture agreements do not subject them to any derivative-related exposure or accounting related issues at production that will prevent them from achieving a timely return on their investment.

Summary

Exploration agreements are important and can make or break a company. Make sure you know exactly what interest the company will end up with after the earn-in period. Also, beware of excessive financial commitments (including non-exploration related option payments) that can put the company at risk during periods of market weakness. In the event commercial viability is established, ensure the production agreement with the major allows for a timely return on the junior partner’s investment.

Royalty Agreements: Low Risk, Premium Market Valuation

Some companies opt for Net Smelter Royalty agreements (NSR) which limits the financial risk associated with funding exploration work themselves. The royalty model allows for industry partners to earn up to a 100% working interest in an exploration project for a firm exploration commitment and rental (option) payments over a specific time period. In this particular case the property vendor would receive a sliding scale royalty (based on the gold price) should the property achieve commercial production. Because achieving commercial production is the responsibility of the project operator, the royalty partner does not suffer any dilution of shareholder’s equity or development capital risk.

A net smelter royalty (NSR) is the amount actually paid to the mine or mill owner from the sale of ore, minerals and other materials or concentrates mined and removed from mineral properties. This type of royalty provides cash flow that is free of any operating or capital costs and environmental liabilities. A percentage of an NSR royalty on an ore body can effectively equate to a larger percentage of the economic value of the ore body.

Royalty companies have low overhead, are relatively easy to evaluate, and generally command a premium in the marketplace.

Summary

The royalty model is virtually risk free but realizing royalty income from an exploration property is dependent upon the project operator achieving commercial production. For exploration companies, holding a strategic land position in a developing gold camp is an essential requirement to attract royalty partners. Royalty exploration companies operate under the principle that you can find gold cheaper through exploration than you could by purchasing production through royalty agreements on the open market. Royalty companies are attractive because they typically command a premium in the marketplace.

Posted at 7:49 PM (CST) by & filed under In The News.

Dear CIGAs,

Here is another important calendar period for the Gold Community. The third week of October 2009. Write it down

Jim Sinclair’s Commentary

Never say never has proved quite true when it comes to China taking action to protect itself against the US bred OTC derivative meltdown actions by the US Fed and Treasury.

Currency traders eye China for clues
By William L. Watts, MarketWatch
Last update: 4:30 a.m. EDT April 24, 2009

LONDON (MarketWatch) – While foreign exchange is unlikely to be the subject of bold public pronouncements when the world’s most powerful finance ministers and central bankers meet Friday in Washington, China’s call for the replacement of the U.S. dollar as the world’s leading reserve currency is likely to be a hot topic behind closed doors, currency strategists said.

Namely, foreign-exchange traders will be looking for any clues to discussions with Chinese officials as policy makers around the world attempt to piece together the implications of remarks by China central bank governor Zhou Xiauchuan in March for the eventual replacement of the U.S. dollar as the world’s main currency with special drawing rights, the quasi-currency issued by the International Monetary fund.

The implication of such a policy would be a weaker dollar, as central banks move to diversify away from the world’s largest reserve currency. And that’s something that makes a number of policy makers, including officials from the 16-nation euro zone, nervous, analysts said.

The prospect of a substantially weaker dollar is unwelcome to policy makers in the euro zone, Japan or other countries worried about their own exports.

The main thrust of China’s message is that it wants to diversify holdings of foreign exchange reserves in a way that more closely mimics the make-up of SDRs, said Simon Derrick, currency strategist at Bank of New York Mellon.

More…

Jim Sinclair’s Commentary

1. Pakistan goes Taliban.
2. Israel makes a miscalculation.
3. Turkey is a Victim.

Turkey defends its pro-Iran stance in Geneva
Thu, 23 Apr 2009 22:29:51 GMT

Turkey has defended its delegation’s decision not to leave the Geneva conference during a speech by Iran’s President, Mahmoud Ahmadinejad.

Ahmadinejad in the UN’s Durban Review Conference in Geneva Monday slammed Israeli atrocities in Palestine and called Israel ‘a cruel and repressive racist regime’.

During his speech, many Western delegations left the conference venue in a move to protest his comments.

Turkey’s Minister for EU Affairs Egemen Bagis who is in Paris for an official visit, highlighted the importance of ties between Turkey and its neighboring Iran, IRNA reported on Thursday.

In a news conference Thursday, when Bagis was asked why the Turkish delegation did not leave the conference venue during Ahmadinejad’s speech, he replied, "Turkey and Iran have historical ties and vital economic relations."

More…

Jim Sinclair’s Commentary

Please read and act:

Martin Armstrong is looking quite good with his insistence that April 19th would figure extremely high on the calendar of the gold community. June is the next important period. His chart of market sentiment gave you the equity rally spot on for both sides.

I point out to you talent, now you need to download his entire library and study it.

All of our incarcerated genius – Armstrong:

http://www.scribd.com/people/documents/6120543/folder/82090

Use Martin Armstrong for TIMING and Alf for PRICE as I stand on the wall regardless of what is incoming to be your WATCHMAN.

All of this requests nothing from you but a bit of respect.

Jim Sinclair’s Commentary

For your information.

Possible Swine Flu Outbreak At NYC Prep School
Department Of Health Officials Testing 75 Students At St. Francis Preparatory School In Queens

As many as 75 students at St. Francis Preparatory School in Queens got sick on Thursday. More got sick on Friday. What health officials want to know is was it swine flu or something more benign.

There are mounting fears about a deadly swine flu virus that is reported to have killed as many as 60 people in Mexico, one that health officials fear has already seeped into the United States.

St. Francis Prep was ordered to cancel an evening program Friday night because the New York City Department of Health isn’t sure what made students sick Thursday and Friday with flu-like symptoms.

"I just saw lot a lot of kids lined up along the wall near the nurse’s office," sophomore Kelsey Dittmeir said.

If it’s the flu, the question is what kind of flu? And could it be the unique strain suspected in 20 recent deaths?

Tests are underway.

"It could be a strain we’ve seen before. It could be the regular flu," Dr. Ross Weiss said. "It could be flu B that happens late in the year. It could be any of those so we really can’t speculate at this point. That’s why we were very anxious to get samples to the lab and get them tested so we can find out what we are dealing with."

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Jim Sinclair’s Commentary

The USA is quite concerned, but when it comes to markets it is so far from TARP or Stress Tests to factor in. There is no more important situation on the planet than Pakistan willingly going Taliban.

U.S. ‘extremely concerned’ about Taliban movements in Pakistan – CNN.com
updated 9:02 p.m. EDT, Fri April 24, 2009

WASHINGTON (CNN) — The United States is keeping a close eye on Pakistan after this week’s Taliban surge into the Buner district brought them just 60 miles from the capital, Islamabad.

A Pakistani government official said Friday that the insurgents had completely withdrawn from the district by the end of the week, but a human rights group said people in Buner were reporting that local Taliban remained in the district.

And senior U.S. officials cautioned that any withdrawal by the Taliban was likely meaningless and that the fundamentalist group now holds large areas of the country with the government seemingly unable to stop them.

"We’re certainly moving closer to the tipping point," Adm. Mike Mullen, chairman of the U.S. Joint Chiefs of Staff said on NBC’s "Today" show Friday.

In the interview from Afghanistan, Mullen said he was "extremely concerned" about indications the Taliban is moving closer to Pakistan’s capital of Islamabad.

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Jim Sinclair’s Commentary

Markets are totally devoid of geopolitical concerns while geopolitical concerns move absolute center stage.

Petraeus: Afghanistan could be harder than Iraq
updated 1:52 p.m. EDT, Fri April 24, 2009

(CNN) — Defeating extremists and stabilizing Afghanistan and Pakistan will require a "sustained, substantial commitment," Gen. David Petraeus, the chief of U.S. Central Command, said Friday.

Afghanistan and Pakistan contain "the most pressing transnational extremist threat in the world," he told a House appropriations subcommittee, while expressing confidence that President Obama’s strategy constitutes the type of commitment that is needed.

Obama last month announced a new plan for the region, calling for more U.S. troops, greater economic assistance, improved Afghan troop training and added civilian expertise.

Petraeus said Friday that although more military forces are clearly necessary, "they will not by themselves, be sufficient to achieve our objective."

"It is equally important that the civilian requirements for Afghanistan and Pakistan be fully met. To that end, it is essential that the respective civilian elements be provided the resources necessary to implement this strategy," he said, urging Congress to fully fund the State Department, the United States Agency for International Development and the U.S. Interagency Civilian Response Corps.

More…

Posted at 12:14 PM (CST) by & filed under Jim's Mailbox.

Dear Jim,

If China could have bought this much gold secretly without anyone knowing, who is to say that they haven’t bought more than this and are just not saying anything about it? Just something I thought I would offer for consideration.

CIGA Dr. Bob

Dear Bob,

Or sold dollars instruments?

Regards,
Jim

Chinese Purchase Could Lead to Structural Shift in Gold Holdings, Says WGC
On Friday April 24, 2009, 1:49 pm EDT

NEW YORK & LONDON–(BUSINESS WIRE)–News that China has increased its gold holdings by more than 75% is a clear indication of the critical role that gold plays in central bank reserves, World Gold Council said today.

Welcoming the announcement by China’s State Administration of Foreign Exchange (SAFE) that the country’s official gold reserves have risen from 600 tonnes in 2003 to 1,054 tonnes, the CEO of World Gold Council, Aram Shishmanian, said:

“The Chinese government’s decision further demonstrates the leadership it is increasingly taking and its public recognition of gold’s proven role as a store of value and portfolio diversifier. We are closely monitoring developments at other central banks to determine whether they will follow China’s bold and thought-leading move, particularly those in Asia.

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Dear Mr. Sinclair,

The grim reaper strikes again: Friday evening, four more banks were closed by the regulators, but I take note of a "new twist"

“…The Federal Deposit Insurance Corp. said it could not find a buyer for First Bank of Beverly Hills, and would pay its nearly $1 billion in insured deposits directly. (The bank had about $179,000 in uninsured deposits). The failure is estimated to cost the agency about $394 million.”

Reuters Link…

American Bankers Link (registration required)…

Best regards,
CIGA Annette

Four More Failures Cause $700M Loss

Four banks and thrifts totaling $2.3 billion in assets failed Friday on another busy — and expensive — night for the Federal Deposit Insurance Corp.

The failures — estimated to cost the FDIC roughly $700 million — were $1.5 billion-asset First Bank of Beverly Hills in Calabasas Calif.; $489 million-asset First Bank of Idaho FSB in Ketchum; $185 million-asset Michigan Heritage Bank in Farmington Hills; and $112 million-asset American Southern Bank in Kennesaw, Ga.

The failure toll has now hit 29 this year — four higher than the total number of collapses last year.

Despite the closures, depositors lost money in only one of the failures Friday evening. The Federal Deposit Insurance Corp. said it could not find a buyer for First Bank of Beverly Hills, and would pay its nearly $1 billion in insured deposits directly. (The bank had about $179,000 in uninsured deposits). The failure is estimated to cost the agency about $394 million.

But no customer at the smaller institutions lost a penny.

Depositors at First Bank of Idaho — which was closed by the Office of Thrift Supervision — will become customers of the main bank subsidiary of Minneapolis-based U.S. Bancorp.

U.S. Bank agreed to pay a 0.55% premium for First Bank of Idaho’s $261 million in nonbrokered deposits. (The FDIC will pay about $113 in brokered funds directly). The acquirer also will buy nearly $18 million of the failed bank’s assets, the FDIC said. The failure was estimated to cost the agency about $191 million.

The FDIC said Bank of North Georgia, in Alpharetta, paid a 0.003% premium to assume American Southern’s $55 million in nonbrokered deposits, while the agency said it would pay the bank’s $48.7 million in brokered deposits directly.

Bank of North Georgia also agreed to buy about $31 million of American Southern’s assets. The failure — the 10th in Georgia since the start of 2008 — is estimated to cost the Deposit Insurance Fund $41.9 million.

Michigan Heritage’s nonbrokered deposits — totaling about $102 million — will be assumed by Level One Bank, also in Farmington Hills, for a 1.16% premium. The FDIC will pay out the failed bank’s $50 million in brokered deposits.

Level One also agreed to buy about $46 million of the failed bank’s assets. The FDIC said the failure was estimated to cost $71 million.

Jim,

Still, we’re told everything is fine

http://www.fdic.gov/bank/individual/failed/banklist.html

JB Slear
Fort Wealth Trading Co. LLC
www.FortWealth.com
866-443-0868 ext 104

Posted at 8:51 PM (CST) by & filed under Jim's Mailbox.

Hey Jim,

Added a few things….

US$ outflows and rapid change of flows implies the dollar rally doesn’t have long to last.  Also, notice the big inflows in the 10-year (most of the yield curve) prior the treasury auctions http://www.treas.gov/offices/domestic-finance/debt-management/auctions/auctions.pdf. Inflows into the energy complex; Nothing significant yet, but any change in direction given the state of world affairs is worth noting.

Markets of Interest

U.S. Dollar:
http://www.facebook.com/photo.php?pid=1557966&l=be2e2aaea0&id=557304509
Commercial "hook" beginning to form after the end of the bear market rally. This could last another 1-2 weeks. Continued outflows will mark the end of the dollar bounce. In general, gold trades inversely to the dollar.

Swissie:
http://www.facebook.com/photo.php?pid=1557964&l=5820b383ff&id=557304509
http://www.facebook.com/photo.php?pid=1557965&l=52fd1f165f&id=557304509

Bullish money flows continue.

Yen:
http://www.facebook.com/photo.php?pid=1557967&l=0b4436683b&id=557304509

Bullish money flows continue.

Regards,
CIGA Eric

Jim,

"This argument is interesting, but more so is the inevitability of hyperinflation, the reality of energy as a currency hedge and the scariest of all, Pakistan."

Now is the time to be buying, not selling oil.

CIGA Eric

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Dear Mr. Sinclair,

The article below is a pretty good summary of many things you’ve been saying for a long time, summarized best by saying "don’t throw away your insurance":

“….Who is going to win the gold wars? Holders of gold? The big winners will be Indian wives whose fathers gave them a lot of gold as a dowry. The rest of us gold bugs will also do well. The general public will never catch on in time, and by the time that it occurs to even 10% or 20% of investors that they better buy gold, it will cost them so much to get into the market that they will not make the kinds of profits that today’s gold investors are going to make….”

Link…

I found the link on the GATA website.

It looks like a nice and finally warm weekend coming up in our neck of the woods.

Best regards,
CIGA Annette

Dear Annette,

This still misses the point! The mindset is wrong.

I am not in gold for profits.

I am in gold to SURVIVE that which we cannot control.

My work is for your total survival. I am making progress in all my efforts, or why would anyone waste time attacking my 50 years of participation in the financial industry, member of most major exchanges, under administrative law, and success in all my efforts?

Regards,
Jim

Posted at 3:42 PM (CST) by & filed under In The News.

Dear CIGAs,

This argument is interesting, but more so is the inevitability of hyperinflation, the reality of energy as a currency hedge and the scariest of all, Pakistan.

Each equate to a higher oil price, potentially much higher when least anticipated and less understood.

"The certain cure for low oil prices is low oil prices."

Jim Sinclair’s Commentary

The key to exit is the ability of any country to handle it own affairs.

Iraq bomb blasts send death toll to 140 in 24 hours
April 24, 2009

A double suicide bombing at Baghdad’s most revered Shia shrine has left at least 60 people dead, the latest in a bombing blitz that has killed and maimed up to 140 people in just 24 hours.

The attack on Friday prayers at the golden-domed Qaddumiyah mosque in northern Baghdad came a day after security forces claimed to have captured one of the leading al-Qaeda figures in Iraq. The two kamikaze attackers blew themselves up in a crowded market just outside the shrine, one of the holiest in Shia Islam.

At least 20 pilgrims from neighbouring Iran were killed in the back-to-back blasts after thronging to Iraq’s Shia holy places. The Qaddumiyah shrine was also attacked by a suicide bomber in Spring 2004, killing scores of people.

Iranian pilgrims made up the vast majority of the 56 victims of a suicide bombing at a restaurant just north of the capital yesterday, which itself came hard on the heels of another attack inside Baghdad that slaughtered almost 28 internally displaced people as they gathered to collect food aid from police officers.

The onslaught has recalled some of the worst days of Iraq’s sectarian bombings, when al-Qaeda sought to ignite civil war by blowing up Shia shrines and market places, killing thousands of people.

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Jim Sinclair’s Commentary

For your information.

New, deadly swine flu hits Mexico, may spread
Fri Apr 24, 2009 6:13pm BST
By Noel Randewich and Armando Tovar

MEXICO CITY (Reuters) – A deadly strain of swine flu never seen before has broken out in Mexico, killing as many as 60 people and raising fears it is spreading across North America.

The World Health Organization said it was concerned about what it called 800 "influenza-like" cases in Mexico, and also about a confirmed outbreak of a new strain of swine flu in the United States. It said about 60 people had died in Mexico.

Mexico’s government said it had confirmed that at least 16 people had died of the swine flu in central Mexico and that there could be another 45 fatal victims.

The government canceled classes for millions of children in its sprawling capital city and surrounding areas on Friday after it noticed a higher number of deaths involving flu-like illness than normal in recent weeks.

"It is a virus that mutated from pigs and then at some point was transmitted to humans," Health Minister Jose Angel Cordova told the Televisa network.

More…

Jim Sinclair’s Commentary

Pakistan

Israel: Pakistan’s nukes could fall to Taliban | International …
Defense official: If Taliban gets bomb, it will be &quota nightmare for the West and will also affect us."
JPost International – http://www.jpost.com/

Jihad Watch: Pakistan: Karachi churches vandalized with "Long live …
By Marisol 
More signs of escalation as Pakistan continues its deterioration into a failed state — a failed state with nuclear weapons. "Taliban attack Christians in Karachi," by Qaiser Felix for AsiaNews, April 23: Karachi (AsiaNews) – Armed men …
Jihad Watch – http://www.jihadwatch.org/

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BBC News

Key talks on Pakistan Sharia deal
BBC News – UK
Officials in North West Frontier Province in Pakistan are meeting to discuss a peace deal with the Taleban that has sparked deep US concern. …
See all stories on this topic

Taliban Advance, Pakistan’s Wavering Worry Obama Team
Washington Post – United States
By Karen DeYoung The Obama administration reacted with increasing alarm yesterday to ongoing Taliban advances in Pakistan, warning the Pakistani government …
See all stories on this topic

Faced with mortal threat, Pakistan chooses denial
USA Today – USA
Nuclear-armed Pakistan is unraveling at a frightening pace. Equally alarming,Pakistan’s leaders appear far less concerned than their American counterparts. …
See all stories on this topic

Clinton warns of Pakistan nuke risk
Washington Times – Washington,DC,USA
By Nicholas Kralev (Contact) and Barbara Slavin | Friday, April 24, 2009 Secretary of State Hillary Rodham Clinton warned Thursday that Pakistan has …
See all stories on this topic

Pakistan – Taliban Nuclear Nightmare : Homeland Security News
By national 
Pakistan Taliban Nuclear Nightmare. Nuclear-armed Pakistan is unraveling at a frightening pace. Equally alarming, Pakistan’s leaders appear far less concerned than their American counterparts. You have to wonder what they’re thinking in …
Homeland Security News – http://www.nationalterroralert.com/

 

Epoch Times – Obama’s Afghanistan-Pakistan Quandary
By By Ashley J. Tellis 
If success in Afghanistan is to be achieved, Washington will have no choice but to erect an effective Afghan state.
Epoch Times | All headlines – http://www.theepochtimes.com/